RELATED COMPANIES

x

Loading data...

x

Loading data...

ChartsValuation & Peer ComparisonCommunity Buzz

Close ✕

Japanese innovator drugmaker Daiichi Sankyo bought Ranbaxy in 2008 for $4.6 billion with an intention to enter the generics space by acquiring the largest Indian pharma company. However, it faced daunting challenges in the pursuit.

A series of import bans on each of Ranbaxy's manufacturing facilities in India approved by the US Food and Drug Administration (Paonta Sahib, Devas, Mohali and Toansa), including a consent decree signed with the US drug regulator, resulted in $500 million payouts in fines, investment towards remediation measures as well as irreversible loss of credibility for the company.

Ranbaxy's market valuation has increased only marginally from Rs 17,609 crore at the time of acquisition to about Rs 19,000 crore now even as that of its peers has increased multi-fold during this period.

The company has reported losses in four of the past six years and has a poor margin profile compared with its peers. The regulatory issues have prevented the company from successfully monetising its first-to-file opportunities in a timely manner. All this took a toll on Daiichi's fortunes too.

Its stock has fallen 40 per cent since its acquisition of Ranbaxy. While Daiichi has sued the former promoters of Ranbaxy for allegedly hiding information regarding US regulatory probes, it had little choice but to look at extracting value from the business either by overhauling the entire structure or divesting its stake in the company.

After failing to exercise the first option, it has settled for the latter — selling its stake in Ranbaxy for $3.2 billion to Sun Pharma. In Sun Pharma, Daiichi is likely to have found what it has been looking for. However, in exchange of its entire holding of about 63 per cent in Ranbaxy, Daiichi gets to acquire a marginal portion of about 10 per cent stake in Sun Pharma — one of the most profitable generics companies in the world.

The promoters of Sun have a proven track record of turning around distressed businesses. Under Sun, Ranbaxy is likely to become more productive and accretive. Daiichi, though, will get to enjoy just a limited share of the success.